Draghi urges discipline in G-20 currency talks

Posted: February 20, 2013

European Central Bank president Mario Draghi said he urged finance chiefs from the Group of 20 nations to be prudent when talking about currency movements.

During a G-20 meeting in Moscow last week, "I urged all parties to very, very strong verbal discipline" because "the less we talk about it, the better it is," Draghi told European lawmakers in Brussels on Monday. "Exchange rates should reflect fundamentals" and "looking at the real and nominal exchange rates of the euro, it is by and large around its long-term averages," he added.

The G-20 sharpened their stance against governments trying to influence exchange rates as they sought to tame speculation of a global currency war without singling out Japan for criticism. The yen is near its lowest level against the dollar and the euro since 2010 after the Bank of Japan signaled further monetary easing to fight deflation.

The euro has gained more than 10 percent on a trade-weighted basis since Draghi pledged on July 26 to do whatever it takes to safeguard the single currency.

"The exchange rate is not a policy target but it's important for growth and price stability," Draghi said.

The euro fell after the comments before recovering to trade at $1.3350 in Frankfurt, down 0.1 percent.

The ECB will assess in its new economic projections next month whether the recent appreciation of the euro has changed the inflation outlook, Draghi said. The ECB currently predicts inflation will average 1.6 percent this year and 1.4 percent in 2014.

Draghi also said the latest euro-area data point to "economic weakness in the early part of 2013," and that this is expected to be followed by "a very gradual recovery later in the year."

The "number-one policy problem now" is to ensure that the ECB's record-low interest rates reach companies and households, Draghi said. "We'll continue thinking about ways and means to enhance the transmission into the real economy," he said.

Launched in 1999, the G20 represents about 85 percent of global gross domestic product and two-thirds of the world's population. Members include the major industrial nations as well as fast-growing economies of Brazil, Russia, India, and China.

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